From leather massage chairs to ionic air purifiers, Sharper Image
Last night, Sharper Image commented on its overhead-trimming initiatives. From layoffs to slower expansion to a reduction in ad spending, the company is serious about improving its expense line items.
It starts at the top, where CEO Richard Thalheimer has slashed his own salary in half. Several managers and the entire board of directors have also voluntarily reduced their pay levels. A move like that isn't going to boost morale at a company that is in the process of laying off between 12% to 20% of its workforce, but at least employees know that even those at the top will be feeling the pain until the mall chain gets it right.
The company will be trimming its ad budget by 30% this year. That move accompanies reducing its mail-order catalog circulation by 30% as well. It may seem like a sound move, but the company is still adamant about introducing more new products this year than it did in the past. Creating more buzz -- with less -- will be the key to the company's near-term success.
Sharper Image is also slowing its expansion. It will open just six to eight new stores this year. That is less than half the number of stores it opened last year and roughly a quarter of the 28 locations it broke in during 2004.
But keep in mind that cutting costs is only working one side of the equation here. Last month, comps fell a staggering 31%. Even on the Internet, where Sharper Image's high-end trinkets were once selling briskly, sales fell by an even worse 32% margin. Online sales also fell more sharply than store sales in January. That's really unforgivable in a day and age when companies like Yahoo!
Sharper Image is toiling in a niche that is currently out of favor. That's why rival Brookstone was also struggling last year when it accepted a buyout offer at a distressed price. It's not that we no longer love gizmos and gadgetry. We do. It's just that we can find them anywhere.
You can buy a Roomba or Scooba robotic household appliance at Target
Shaper Image is right to ramp up its new product introductions, because exclusive debuts will set the company apart from the mainstream competition. It introduced a line of FresherLonger food storage containers earlier this month. Gunning for Income Investor recommendation Tupperware
And the higher paychecks.
Longtime Fool contributor Rick Munarriz applauds a CEO willing to slash his salary during bad times --as long as the stock option grants follow suit. He does not own shares in any of the companies mentioned in this story. The Foolhas a disclosure policy. Rick is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.